Monday, November 16, 2020

Monday Morning Chartology

The Morning Call




The Market




       On Friday, the S&P challenged its all-time high of the second time in the week.  Whether one looks at this pin action as the third and fourth attempt to push through that boundary or that the entire week was all part of the same challenge really doesn’t matter.  The bottom line is that the index is now challenging its all-time high and we must await its success or failure.  If the latter, the S&P will still remain in a trading range which must be resolved before we can have directional confidence.


       The chart of the long bond is roughly the reverse of the S&P’s.  It has made a triple top and established a three month downtrend and resetting its 100 and 200 DMA’s to resistance in the process.  However, it failed to successfully challenge the lower boundary of its very short term uptrend.  A second attempt seems likely; and if that proves successful, the next support level is considerably lower (interest rates higher).


        The dollar’s chart mimics the long bond’s.  UUP made a March high, established a five month down trend, in the process reset its 100 and 200 DMA’s to resistance and has bounced off the lower boundary of its short term trading range twice.  We await either another challenge of the lower boundary of its short term trading range or the upper boundary of its very short term trading range.    


       Gold remains in a three month trading range.  On the positive side, it tested the lower boundary of that trading range and bounced.  Plus, it has that huge gap down open that needs to be filled although it still must successfully challenge its 100 DMA to accomplish that.  Further, even if it is successful, it must push through its all-time high (horizontal black line at top of chart), to regain upward momentum.  Net, net, short term directional uncertainty is the name of the game for GLD.


            Bottom line.  All these indicators are in trading ranges and are also near a challenge of one of the boundaries of those trading ranges.  Clearly, one way or the other, they will all break one of their boundaries, resetting directional moves.  My guess is that they will do so roughly simultaneously which will likely reflect a new accepted economic scenario.






              The Economy


                         Review of last week


The economic data last week was neutral with no primary indicators reported.  So, the stats continue to discount any notion of a ‘V’ shaped recovery.  Unfortunately, the odds of a stimulus bill anytime soon are fading and the probabilities of another lockdown are increasing, which makes a ‘V’ recovery even more unlikely.


Overseas, the indicators were negative, maintaining the erratic course of the global economy.  And with renewed lockdowns occurring across Europe, there does not seem much hope of improvement.  Not helpful to our own recovery.



Whatever the shape or magnitude of the near term bounce back, I am not altering my belief that long term the economy will grow at a historically subpar secular rate due to the twin burdens of egregiously irresponsible fiscal and monetary policies---which, by the way, are becoming even more egregiously irresponsible as a result of measures being taken by the government and the Fed in dealing with the current crisis.


                                America’s unending spending frenzy.



                                The Fed has a commitment problem.





The November NY Fed manufacturing index was reported aet 6.3 versus projections of 12.75.




September Japanese industrial production was up 3.9% versus estimates of up 4.0%; Q3 preliminary GDP growth was 5.0% versus 4.4%, capital expenditures -3.4% versus -3.0%, personal consumption +4.7% versus +5.1%.


October YoY Chinese fixed asset investments rose 1.8% versus consensus of +1.6%; industrial production +6.9% versus +6.5%; retail sales +4.3% versus 4.9%.




            The coronavirus


              Moderna vaccine 95% effective at room temperature.





              The next five year plan.




            Bottom line.  Why investors are walking into a trap.



    News on Stocks in Our Portfolios



What I am reading today


            Quote of the day.





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